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In Albany this week, UFT President Michael Mulgrew floated a plan to save the city money by letting teachers retire earlier. But a new report on the health of the city’s teachers pension fund suggests that Mulgrew’s proposal would only compound the fund’s potentially crippling budget crunch.

The fund’s annual report, released last week, shows that it lost 29 percent of its value, more than $9 billion, last school year, even as the portion the city is required to pay reached unprecedented heights.

The mix of rising costs and declining value raises serious questions about how the city will be able to afford to pay the pensions it has promised in the future without major concessions by the teachers union.

The fund, called the Teachers Retirement System (TRS), is a collection of investments paid for with a combination of taxpayer dollars and teacher salaries. Every year a chunk of it is used to pay retired teachers and principals the pensions state law says they are owed.

Last year’s financial crisis sunk the fund to its lowest level in more than 15 years, effectively erasing all of the gains made in the past decade’s bull market, according to a database of TRS’s financial reports. Over that time span, the fund’s value, adjusted for inflation, has shrunk by more than $11 billion.

This leaves a $15 billion gap between what the fund expects to pay out in the next 30 or so years and what it will have saved by that time, according to the TRS’s preferred accounting method. Another way of calculating these “unfunded liabilities” used in the private sector puts the number even higher, at $27 billion.

“It’s not a crisis. It’s a long-run big problem: The pension system is far more costly than it ought to be,” said Charles Brecher of the Citizens Budget Commission, an independent group that advocates for changes in city and state finances. (more…)

The highly anticipated contract negotiations between the teachers union and the city are officially off and running.

In anticipation of the UFT contract’s October 31 expiration date, officials from both sides met yesterday to begin the negotiation process. The negotiations are colored by the city’s dismal financial projections and the upcoming mayoral election — the UFT has yet to endorse a candidate for mayor. They are also UFT president Michael Mulgrew‘s first significant challenge, and are likely to be a factor when he comes up for election in the spring.

Though both sides have signed confidentiality agreements allowing them to keep mum when the press pushes for details, neither has been entirely silent about changes they’d like to see made to the contract.

Chancellor Joel Klein has made no secret of his desire to see the Absent Teacher Reserve drained. The pools currently holds 1,695 teachers who previously worked in schools that have been closed. Though they remain on the city’s payroll, they do not have full-time teaching positions. The point of tension between Klein and the UFT is how to drain it.

On Wednesday, the first day of school, Klein reiterated his support for Chicago’s model, which allows teachers who’ve been laid off to spend one year searching for a new spot in the school system while receiving their regular salaries. At the end of that year, those who haven’t landed new positions are forced to move on. (more…)